ECONOMY OF PAKISTAN: AN OVERVIEW 2

Pakistan’s manufactured exports in the 1960s were higher than those of

Malaysia, Thailand, Philippines and Indonesia. Had investment in educating the

population and upgrading the training, skills and health of the labour force been

up to the level of East Asian Countries and a policy of openness to world market

would have been maintained without any break, Pakistan’s exports would have

been at least US$100 billion instead of paltry US$13-14 billion. Had the

population growth rate been reduced from 3 percent to 2 percent, the problems

of congestion and shortages in the level of infrastructure and social services

would have been avoided, the poor would have obtained better access to

education and health and the incidence of poverty would have been much lower

than what it is today.

But as if this neglect of human development was not enough, the country

slacked in the 1990s and began to slip in growth, exports, revenues, and

development spending and got entrapped into external and domestic

indebtedness. This was due to both fundamental structural and institutional

problems as well as to poor governance and frequent changes in political

regimes. With short life spans, succeeding governments were hesitant, if not

outright unwilling to take tough and unpopular economic decisions to set the

economy right. Moreover, the average lifespan of two to three years was clearly

inadequate for implementing meaningful policy or institutional changes. The

external environment had also become unfavorable after the event of May 1998,

when Pakistan conducted its first nuclear test. The aftermath of this test led to

further economic isolation of Pakistan and a considerable erosion of confidence

by domestic and non-resident Pakistanis. Economic sanctions were imposed

against Pakistan by the western governments. By the late 1990s Pakistan had

entered almost a critical state of paralysis and stagnation in its economy

particularly in its external sector. There was a significant drop in workers’

remittances, export growth was negative, IMF programme and World Bank

assistance were suspended, bilateral donors had terminated their aid while debt

payments due were in far excess of the liquid foreign exchange resources the